Key facts
- Cloudflare raised its full-year revenue forecast to $2.86 billion-$2.87 billion.
- The company increased its adjusted earnings per share forecast to $1.25-$1.26.
- The updated outlook surpasses analysts' average estimate of $2.81 billion.
- Cloudflare's Workers developer platform is its fastest-growing segment.
- Shares have gained over 44% year-to-date.
Cloudflare shares increased 16% before the bell on Friday following the company's decision to raise its annual financial forecasts, driven by expectations of sustained AI-related demand impacting network traffic. The company now anticipates full-year revenue between $2.86 billion and $2.87 billion, an upward revision from its previous projection of $2.805 billion to $2.813 billion. This new outlook surpasses the average analyst estimate of $2.81 billion.
Additionally, Cloudflare boosted its adjusted earnings per share forecast to a range of $1.25 to $1.26, up from $1.19 to $1.20. Analysts from Morgan Stanley pointed to the company's Workers developer platform as its fastest-growing segment, noting a shift towards a usage-based model and expressing confidence that Cloudflare will exceed its raised outlook.
Analysts also emphasized Cloudflare's potential to benefit from increased cybersecurity needs as advanced AI models alter the cyber-risk landscape. Year-to-date, Cloudflare shares have climbed over 44%, compared to gains of approximately 77% for CrowdStrike and 95% for Palo Alto Networks. The stock is trading at a forward price-to-earnings ratio exceeding 190, higher than CrowdStrike's ratio of over 145. Analysts at RBC Capital Markets commented that Cloudflare possesses multiple, durable avenues for long-to-medium term AI monetization, justifying its premium valuation.